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Top Highlights on the Crypto Derivatives Markets in 2020 with FTX CEO Sam Bankman-Fried

According to a recent interview with the CEO of FTX and Alameda Research Sam Bankman-Fried, there is a significant difference between Asia-based/global exchanges and US exchanges. Global Coin Research has highlighted succinctly the main points Sam made in the interview, along with Sam’s views on FTX and his outlook on derivative trading in 2020.

On Differences between US-based exchanges and Asian/Global exchanges

Trade volume difference: “I think there is sort of a divide [between west and east], but even more than that, I think that there is sort of one side of the divide that right now has all the volume.” <-referring to the exchanges outside of the US

Exchange setup difference: “[these Asian/Global] exchanges, which sort of take a very different approach to things. And it features everything from how the products are structured, to how funding works and how you move capital around, to who the users are, and the interface, and the failure cases, and everything else.”

Customer account opening experience difference: “And it seems very clunky from the perspective of a person trying to do their first trade, whereas with, you know, a lot of the Asian exchanges there is a philosophy that’s like you go to the URL, you have an account in five minutes, you know, to the extent you’re doing KYC, you can have, you know, the bulk of that done in half an hour, and then you can get your funds there within an hour, and then you’re sort of fully up and running with exactly the same setup as, you know, the most sophisticated player in the industry. Now that’s a pretty stark difference, and it flows through to a lot of aspects of the product. And the way it seems here makes it seem like one is just better. Like, you know, obviously the global way is better, the U.S. was really clunky.”

Institutional-focused design differencesdifference: “You have one that is used to connecting up to the FCMs, to CME’s systems–the Wall Street world, so to speak–and then you have the crypto-native players who are used to interfacing with an exchange like FTX…And so sort of one of the structures is very much designed for, like, you know, crypto-native traders, retail traders and to be up and running quickly, and the other is very much designed for Wall Street institutions to be able to easily and sort of seemingly safely interface with.”

Regulations stifling US exchanges: “I don’t know if anything comes because offshore places get shut down. I think it’s actually more likely to come if the U.S. opens up more access to crypto. And so I think the bigger factor there, instead of waiting for foreign exchanges to die off, I think it’s more that U.S. exchanges are currently significantly bottlenecked by regulation. nd, you know, the fact that they can’t you know, the fact that that there isn’t a retail futures platform in the United States is a significant hindrance. And that’s obviously a regulation-driven fact.”

FTX Performance Thus Far

FTX volume: “so I think that we’ve been trading something like, you know, somewhere between one and six thousand Bitcoins a day of options. It fluctuates a fair bit, I think, way more than, you know, Derebit’s do because Derebit has a way more established market with sort of steady flow, whereas for us it’s a lot of people trying it out…But it’s been somewhere in the one to six thousand Bitcoins, that’s something like, you know, 8 to 50 million dollars of notional trading a day, which we’re pretty happy with for, you know, a month in.”

How FTX selects the futures to list: “you know, a really successful future might be one on a price that goes down a lot and gives customers an opportunity to short it as much as one that goes up a lot and gives customers an opportunity to be long. So you were less looking at what do you think is going go up or down when we buy? We also don’t charge any sort of listing fees in any way… What we’re looking at basically is a combination of how liquid is it and how much volume will it trade on it. Yes. And that’s really the bulk of what we care about. And everything else is sort of secondary unless there’s some sort of weird, idiosyncratic red flag with it…We’ve shied away from privacy points somewhat for regulatory reasons. And that’s actually something I should just look into.”

2020 Outlook on the Crypto Derivative Space

2020 outlook on the crypto future space and FTX: “One of [new markets for FTX] is a growth of different types of derivative and tokenized products. So, you know, you saw the options rollout was one step of that. And we’re going to put a lot more into that as well. We’re sort of continually making that a more robust and developed product, but we’re going to do a lot of other I, you know, sort of generalized ways of. Basically thinking about using trading on new various trading strategies, tokenization of various I cryptocurrency ie trades in assets and positions and sort of more details will be coming out in the next month or so about this. But I think we’re gonna be leaning in a lot to be, you know, sort of the metal products base like thinking about, you know, leverage tokenized as an example of tokenized sort of tokenized trade. And but there’s sort of a much broader field there. And so I think we’re going to do a lot of work on that and probably also work on more derivative products.”

Global Coin Research is a US-based research publication focusing on Asia blockchain and cryptocurrency. The research sheds light on the exchange, mining, token projects and regulatory landscape in Asia.